Microsoft pitches Surface Pro with Mac-iPad price comparison

Analysts disagree on whether the price challenge is fair or even worthwhile

Last week, Microsoft made the clearest case yet for its Surface Pro tablet when a top Windows executive said it should be compared with not one, but two Apple devices.

While analysts agreed that Microsoft's Surface Pro message was much clearer than the muddled one it offered last year for the Surface RT, and some saw the comparison as fair, others said it was wishful thinking on Microsoft's part.

As part of a series of interviews with prominent bloggers last week, Tami Reller, the CFO and head of marketing for the Windows division, pitched her case for the Surface Pro.

"I'm getting [an] Ultrabook-class PC with the added benefit of a tablet package," Reller said when asked by GeekWire's Todd Bishop whether the Surface Pro faced a pricing problem. "It's all I need. $899 plus a keyboard of my choice, I'm into the $1,000 category, and I have all I need.

"Compare it to a typical Apple buyer, who is going to get a MacBook Air, plus an iPad," argued Reller. "That's a more interesting comparison. If you've got a buyer who needs both a computer and a tablet, Surface Pro is $1,000, versus $1,000 plus $500 [for the MacBook Air and iPad]. I think that's the interesting comparison."

Although she didn't spell it out, Reller was referring to the lowest-priced MacBook Air, an 11-in. notebook with 64GB of flash memory storage; and the entry-level 9.7-in. iPad, which features 16GB of storage space. The devices retail for $999 and $499, respectively.

Microsoft has never disguised the fact that the Surface Pro would be a tablet with ultrabook characteristics, or sell at an ultrabook price. In June, when the company surprised even its OEM partners by introducing the Surface line, it said that the Pro would sell for about the same as Intel-powered ultrabooks, whose prices have ranged from $700 to above $1,000.

But the two-in-one argument Reller made was Microsoft's most explicit, and her comparison with a combination of MacBook Air and iPad a first.

"It's a fair comparison," said Ezra Gottheil, an analyst with Technology Business Research, in an interview earlier this week. "It's a more satisfactory ultrabook, but it's also a tablet. You end up with a device that's a very capable PC, and a pretty-capable tablet. That makes it a good deal."

Gottheil also applauded Reller for making the point. "Microsoft found a message that matches its strength," he said, in contrast to last year's Surface RT. "It was not at all clear what they were saying about Surface RT."

Patrick Moorhead of Moor Insights & Strategy did some back-of-the-envelope arithmetic and agreed that the Surface Pro was less expensive than buying both a MacBook Air and an iPad.

The cost of a Surface Pro with 64GB of storage space and the lowest-priced cover-slash-keyboard, the Touch Cover, totaled $1,029 ($899 + $130). That would be a savings of $469 compared to the dual purchase of a MacBook Air and iPad ($999 + $499 = $1,498).

Even the 128GB Surface Pro equipped with the more-expensive Type Cover -- $999 + $140 = $1,139 -- came in $359 under the Apple notebook-tablet combo.

But Moorhead wasn't ready to call Reller's comparison legitimate: The tablet side of the Pro is simply not up to snuff, he said.

"This isn't yet a fair comparison ... but it's a comparison Microsoft would like to make," Moorhead said. "The challenge for Microsoft is that the Surface Pro doesn't make a very good tablet. Yet."

He cited tablet-esque weaknesses that ranged from the Surface Pro's weight -- heavier than a MacBook Air when the Type Cover is included -- and an anticipated short battery life, to too few apps and limited storage space on the 64GB model.

The primary culprit of the worst of those failings, Moorhead argued, was the power-hungry Intel processor. That situation should change in 2014, when Intel and AMD push new lower-powered chips to market, and as AMD boosts the performance of its power-miser processors.

But for 2013, the Surface Pro can't cut it on the tablet half of the equation that Reller used.

"Microsoft's putting the Surface Pro in the most favorable light possible, which is what you do, but it's an early product. With the things on the horizon [devices like the Surface Pro], will get really, really good next year," said Moorhead.

Some experts questioned the legitimacy of Reller's message on other grounds.

"It's an apples and oranges comparison," said Wes Miller, an analyst with Directions on Microsoft, contending that customers don't go looking for a hybrid when shopping for a notebook. "They're trying to blur [the lines] and induce people to buy the Surface Pro."

Even Gottheil, who was the most bullish of the three analysts on the Surface Pro, noted, "You don't make a buying decision on where you get the cheapest combination."

In fact, with tablets quickly skewing to smaller screen sizes -- buying trends indicate that the 10-in. tablet will account for a minority of sales this year, replaced by 7-in. devices -- the Surface Pro argument may not hold water for long.

"Windows 8 may not work on a smaller-scale device," Gottheil acknowledged.

"I would still recommend people check out a 7-in. tablet or a phablet," said Moorhead of the term used to describe phone-tablet hybrids with screens as large as 5-in., like Samsung's Galaxy Note II, as a companion to a lightweight notebook. "The Surface Pro isn't a tablet that you're going want to kick back in bed to read a novel."

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